A new blog post on Systemic Insight at IDS

Shawn and I wrote a blog post on the IDS website about our recent article for the IDS Bulletin. Here is how it starts:

The company we work for, Mesopartner, supports development organisations to address the challenge of innovation and change towards economic development, cluster and value chain promotion and the strengthening of local innovation systems.

In our work in economic development, we often find ourselves in situations where we don’t know which interventions will work and what exactly a good outcome will look like.

As a result, those working to plan and deliver development interventions may have divergent views on what must be done and why. These situations are complex (PDF)  and uncertain (following Frank Knight’s definition of uncertainty).

Read more at the IDS blog

Is target sector selection a good place to start

In much of private sector development, the selection of a particular economic sector or sub sector happens quite early in the development process. Typically a sub sector is selected either for its potential in terms of job creation, exports or some other criteria. These indicators are sometimes informed by some preliminary research, other times by careful statistical analysis.

Approaches such as market development (a.k.a Making markets work for the poor) often assume that if a market that is important to a particular sub sector can be improved, then the society (and of course the sub-sector) will benefit. This logic ignores that a market is deeply embedded in a social context, what Mark Granovetter called social embeddedness. Furthermore, market failures tend to be interconnected as markets are interdependent. Thus the chances that a market is failing for a particular good or services in isolation of many other markets is slim. Market development is an evolutionary process that requires the co evolution of product and service markets as well as market supporting organizations and systems (markets are about far more than supply and demand, unless you are a traditional economist). This evolution is enabled or hampered by the presence of social institutions like trust, habits, value as well as formal and informal organizations that provides market guidance, regulations that reduce transaction cost (for instance by providing quality assurance).

The chances that a particular sub sector and its supporting markets, say for instance dairy farming with its small farmer network that is connected to a retail market, will evolve as an exemplary island in a sea of chaos (as in disorder, randomness, inconsistent behavior, low trust and fragmented efforts to improve the system) is highly unlikely.

In these instances, a sectoral or sub-sectoral approach is futile. Of course, it could be argued that working with a particular sub sector reveals something about the society, an argument that we cannot disagree with. However, most development programmes are measured at the micro level (in other words at the level of the actors in a particular sub sector) rather than on the improvement of the overall system conditions which includes adequate or responsive domestic market supporting organizations and supporting social institutions.

If you really want to support faster change in a developing country, perhaps a more promising place to start is with the actors that are behaving differently from the rest. This is a very qualitative or subjective assessment, but with this group of outliers it may just be possible to prove that a different kind of behavior is profitable (or effective), and that the boundaries created by culture, habits and routines may need to be adjusted.

The importance of outliers

When you do an analysis to promote local economies and innovation, who is your target group? We at Mesopartner have always emphasized that it is of key importance to understand the system in which a business acts. This involves the informal and formal relations in which businesses interact with others (e.g. in clusters, buyer-supplier networks, value chains and innovation systems), the perspective of businesses, including their perception about themselves, their markets and their business strategies, and finally the market forces that are in place in related subsectors.

Getting a preliminary feeling for the reality does not always require lengthy analysis. Rapid appraisals and direct interaction can be a starting point and provide a first insight into the system. However, it also requires a good selection of interviewees from businesses and supporting institutions. How would you select the target group for such an analysis? Many analysis frameworks take the following approach: businesses are first selected from a sector, cluster or value chain, followed by important institutions in the environment (technology stations or centres, knowledge providers, R&D organisations, training institutes, etc.). They are interviewed, conclusions are drawn and interventions designed.

For some time Mesopartner has been reflecting on how to improve the way in which we do analyses to better understand the complexity of the environment in which we work and promote interventions.

One important aspect for gaining a better understanding of patterns in complex systems is to ask yourself once the overall analysis has been done, What is really going on here? What patterns of behaviour can we identify? An important aspect which we now stress is to look at outliers, which behave and act very differently from the majority.

In economic development promotion, this outlier perspective is often not much taken into consideration, and often businesses and institutions with similar patterns of behaviour and ways of thinking are visited. What is needed far more is the identification, already at the preparation stage of the analysis, of outliers as an important aspect; not only as an add-on, but as a key perspective. Which outstanding businesses and supporting knowledge institutions are behaving differently from the usual way of doing things? What is driving them? What are their patterns of positive and negative behaviour? How do they deal differently with the reality and the system around them?

In our work in Mesopartner we firmly believe that you have to start working with what you have rather than building parallel structures. Just few weeks ago in a Mesopartner meeting I was introduced to a methodology called “Positive Deviance” (Thanks Sonja!, @sonjabl) and the insight greatly aroused my interest. It assumes that in every community there are positive deviants that have specific attitudes, cognitive processes and behavioural patterns that differentiate them from the majority. They generally find different and new solutions, they follow new paths – they can be very small and typically not show up on the radar screen. Instead of making heroes of these businesses or people, it is rather the objective of the approach to demonstrate that in a specific community, cluster or sector there are uncommon behaviours which have proven to be successful and which can be adopted by all because they are already being practiced by a few within the network.

While the positive deviance approach looks very much at positive examples, it is my understanding that it is as important to look at outliers in order identify negative behaviour patterns that are in place. Both perspectives are important and necessary to gain a better sense of the dynamics of the system.

In his commendable book “Outliers”, Malcolm Gladwell especially tries to overcome the argument that the success or failure of outliers is related only to individual experience, (lack of) talent and motivation. He places much emphasis on the role of the system that shapes the development of outliers:

The tallest oak in the forest is the tallest not just because it grew from the hardiest acorn, it is the tallest also because no other trees blocked its sunlight before it matured. We all know that successful people come from hardy seeds. But do we know enough about the sunlight that warmed them…?

An intensive search for outliers in our daily work can provide us with deeper insight into how the social system, innovation system or cluster works and where to test interventions to promote interrelations.